The shooting of an unarmed young man who was taunting the police from
the doorway of his home and which then set off scores of riots and
shop burnings and lootings in London and a dozen other cities of
England is relatively unimportant in the larger scheme of things. The
two most powerful individuals in England, Prime Minister Cameron and
Chancellor Osborne, face a much more serious problem.
They face the possible bankruptcy of many scores, if not hundreds, of
financial industries and services which occupy only a square mile or
two of London. For the last 15 years or so, these have been by far
and away the predominant profit-making sustainers of the whole of the
economy of England, not to mention the dependent economies of its
satrapies, Scotland, Wales and Northern Ireland.
London is not alone, however. Hundreds, if not thousands, of
financial industries and services in New York, Shanghai, Tokyo,
Singapore, Sao Paulo, several West European capitals, and many other
financial cities also face disaster. Eminent and highly qualified
spokespeople in all these places have been giving opinions which
agree with those of our own Chancellor two days ago when he said:
"This is the most dangerous time for the global economy since 2008".
Whereas the London burnings were the product of a complex mixture of
policy mistakes and trends of the last 50 years or so, the really
important crisis of the world originated with one simple decision
taken in the first few weeks of World War I, 1914. When the Treasury
in London realized that the war was going to last longer than a few
weeks and that its armaments would require far more banknotes than
the gold-backed banknotes then in existence, it instructed the Bank
of England to start printing them (against government bonds as
collateral) in massively larger quantities. All the other European
countries and America followed tout de suite.
And it has continued ever since, the arch-destroyer of real money
now being America with its ever depreciating dollars. The dollar
today (and each and every other currency) is now worth only about 2%
of what it was in 1914. There is a minority of economists who now say
that the only (and inevitable) ultimate solution is to go back onto
gold-back currency. This is the so-called Austrian school of
economists. Unfortunately, their books are so impenetrably pedantic
that we must turn somewhere else for clear vision.
Perhaps it may be one of the students of the London School Economics
who attended a debate a few days ago between eminent proponents of
Keynes (his early ideas) and Hayek. A straw poll of these students
revealed the surprising result that half of them were inclined to the
views of Hayek -- who, of course, was an expositor of a gold-backed
currency. (Keynes became a Hayekian in his last years.) There's also
a group of brilliant economists at George Mason University in America
who are saying the same. However, for now, until a fresh young
intellectual mind appears on the scene -- hopefully a genius
equivalent to Keynes or Hayek -- we'll have to make do with Jim
Rogers, one of the original partners of George Soros. He ought to
know a thing or two about the real workings of finance. Or perhaps
Robert Zoellick, the President of the World Bank, who wrote a very
careful article on the matter in the Financial Times last November.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/08/
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